Choosing the right business to purchase can be an incredibly difficult process, especially when you’re not seasoned in the process. This is where a business broker comes in, helping you to buy and sell your businesses. They have plenty of experience and network opportunities to get you the best deals and find you the most exciting new businesses to consider – businesses you probably wouldn’t have been able to find on your own.  How exciting! Here’s everything you need to know about using a broker to acquire your next business.

What do business brokers do?

There are two major groups of services that business brokers offer, including:  

What is a sell-side engagement?

A sell-side engagement broker focuses on an agreement where the owner of a business hires a broker to help sell the business. The broker acts as your representative for the seller, helping with the entire transaction and everything in between. Business owners use a broker to maximise the value of the business, all the while reducing the owner’s stress and workload. Many sellers find that using a broker is much easier and more enjoyable than when they try to sell without one. 

What is a buy-side engagement?

A buy-side engagement broker will help you when acquiring a business, so they’re the best professionals to look for when you want to buy a business. Your broker can be as involved as you want, with there being two main ways they can help you – either through a passive search or an active search. This gives you the opportunity to choose how much involvement you want in your business dealings, depending on how much experience you can bring to the table along with your broker.    Let’s take a look at how these two options differ to hopefully help you decide what you need:

Brokers assisting with a passive search

When you choose your broker to help with a passive search, they’ll usually add you to their internal database of potential buyers. Your broker will collect all of the necessary information about what you’re looking for, your background, target market, investment timelines, and more, so you’re only getting recommendations tailored to your specific needs and wants.    Once your broker finds a company for sale matching your criteria, they’ll send you the details to see if you’re interested in the opportunity. It’s up to you then to research for yourself and determine if it’s a worthwhile investment for you. 
Most brokers won’t ask you to pay a fee for being added to the internal database, and the vendor will often pay the broker’s fees if you end up buying the business. As you’re not getting as much contact with your broker with this method (they’ll only contact you when they have an opportunity, and this could take weeks or months), it might be worth contacting several brokers and getting yourself on multiple lists of potential acquirers. 

Brokers performing an active search

Alternatively, if you want your broker to work more closely with you to hopefully speed the process up a little bit, you can hire them to work directly for you. You’ll go through everything you’re looking for in your new business and create criteria, and this will be used to create a list of potential businesses that you might be interested in. Your broker will then contact these businesses and let them know of the opportunity you’re offering them.    The interesting thing about brokers performing active searches is that they don’t just look for businesses that are listed as selling – they’ll even contact those with no desire to sell. Part of their role is convincing these businesses to sell to you, even if they had no intention beforehand.    Once you’ve chosen a business to acquire from the list your broker has given you, they will then set up a valuation and the rest of the proceedings to get the sale finalised. This can take between six and 12 months, and your broker will manage the majority of it to keep as much of the stress off of you as possible.   After your sale has gone through, you’ll need to pay the broker fees along with a retainer upfront and a monthly fee for their search time – so this is definitely the more costly option. However, you’re much more likely to see results in a quicker time if you choose to go this route. 

Final thoughts

Business brokers are invaluable for people looking to acquire businesses, taking plenty of the stress out of the initial search, negotiations, and more. We highly recommend you enlist the help of a reputable broker, like Lloyds brokers, to help with your goal of buying a business – whether you opt for a passive search or a more active approach. Either way, your broker can provide you with specialist advice to make this process as smooth sailing as possible. Good luck!